Pandora Media Falls on Lower Profit Forecast

Pandora shares fell following its announcement to investors it would spend more aggressively on marketing in defending its lead in the market in online radio. The move will put a dent in the company’s profit.

For the second straight quarter, Pandora has forecast it would break even or possibly earn as much as 3 cents a share, the company, based in Oakland announced last week. The forecast was less than analysts who have forecasted a profit of 5 cents a share.

Pandora has had to spend more to keep and attract more listeners. Marketing costs during the first quarter increased by 63% to over $61.9 million said the company, which was in line with its increased revenue. Costs of content were up by 26% to over $108.2 million.

CFO Michael Herring said the investment curve has become higher than what Wall Street had suspected, as it is a great deal of work to provide the best online music service.

Pandora shares dropped by 11% this week, prior to recovering to close on Friday at $28.20 and this year are up by 6%.

The music service is set to benefit from increased advertising on its desktop and mobile products, with users listening more often and longer, according to an industry analysts, who has a recommend on purchasing the stock.

The first quarter net loss was $28.9 million or equal to 14 cents a share, compared to $38.7 million or 22 cents a share during the same time one year ago.

Pandora said sales had advanced by 69% to end the quarter at $194.2 million, with revenue at $180 million, an increase of 54%. Analysts predicted revenue would be $175 million.

Pandora makes its money through ad sales as well as ad-free subscriptions. Prices for its paid service are to increase starting in May to $4.99 per month for any new users, said Pandora in March.

Data on Pandora’s audience showed that listener hours had increased by 12% to over 4.8 billion during the first three months of the year compared to last year during the same quarter. Active overall listeners were up by 8% to more than 75.3 million.

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